Uber is one of my favorite disruptions, or as you’ve read in my previous articles, “Napster Moments.” This is when someone who has no business being in a business comes in and reinvents the business and puts someone out of business.
In the case of Uber, the reason I like it so much is because, generally speaking, I can’t stand cabs. This is probably true for many people who live in or near large cities and who take a cab or car service often.
Aggressive driving, texting and talking on the phone while driving, bad attitudes, dirty cars and, oh, the smell!
However, Uber eliminates all the issues above, and they have also created a system where you don’t have to call a cab and wonder if they will show up. And you don’t have to exchange any money or wait for the credit card to run through.
Not only has Uber transformed the customer experience, it actually grew the category. People who were infrequent or nonusers of car services are now using Uber as an alternative to driving themselves, their kids and anyone else who needs a ride. They have also created revenue streams for people with cars and some flexibility. Finally, they leverage an already existing infrastructure to do it. This is pretty amazing stuff. Yes, I know there is controversy over surge pricing and an occasional bad driver; however, on the whole, Uber has made a big difference in the lives of consumers and created a big dent in the demand for traditional services.
But wait, there’s more. Uber recently created disruption in the insurance industry. Yes, they have created “insurance by the mile.” This was their response to the need for their non-full-time drivers to be covered as a commercial driver when they are on the job and as a “regular person” when they are not. Drivers simply flip on an app on their iPhone while they are en route to pick up someone or driving them to their destination. Once they are no longer on Uber’s clock, they shut it off. They are covered (and presumably charged) only for the miles that are relevant to them.
Is there anything that the life insurance industry can learn from “insurance by the mile?” Hmmm. Let’s unpack its characteristics.
- The need is temporary
- The need arises more than once
- The need is in short bursts
- The time of need is not necessarily predictable
What about life insurance by the minute? I can think of several activities that impact a person’s mortality risk and fit the same four characteristics above. Scuba diving. Private piloting. Rock climbing. International travel. These activities usually cause all premiums to be increased even if the frequency of the activity changes over time. But what if these risks could be covered only for those moments when the activity was taking place?
For example, if I go rock climbing (not that I ever would do that), I could flip on my app just before starting and then turn it off when done. My policy could charge an extra amount just for those moments I am doing this activity and automatically take the payment from my bank account or credit card. Some might say that I’d pay basically the same amount as if I had a rated policy, but I doubt it. After all, even if the applicant is completely honest about the frequency of these activities, nobody can monitor whether it is more or less frequent. But in the case of insurance by the minute, the policy owner has incentive to give perfect information.
Travel accident insurance is a precedent for this idea for sure. However, the strategically planted kiosk in the airport feels more like an attempt to scare people into a need versus empower them into a choice. I like the latter, personally.
The point here is not necessarily to promote this particular idea, but rather to use outside inspiration to innovate new solutions. What (else) would Uber do?